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PRESENT
10.11.2014
three years commencing from 16th May, 1990 and an agreement between
the parties was executed for the same on 15th May, 1990 having arbitration
clause. On completion of both the contracts, a dispute cropped up between
the rival parties regarding payments, and therefore, first respondent for
redressal of his grievances invoked arbitration clause and initiated the
proceedings for appointment of arbitrator for both the contracts.
By
these appeals by a common order dated 16th February, 2005. The Court
held that petitions under Section 34 of the Act of 1996 are not time barred,
and therefore, while allowing the appeals, matter was remanded back to the
learned District Judge for deciding objections of the petitioners afresh on
merits. The operative portion of the order reads as under:The net result is that the impugned order cannot
be sustained. The appeal is therefor allowed, the
impugned order is set aside, and the matter is sent back
to the learned trial Court, with a direction to decide the
objections on merits, in accordance with the law, and
most expeditiously.
The parties are directed to appear before the
learned trial Court on 11th March 2004, as prayed.
After remand, the petitions under Section 34 of the Act of 1996 filed
on behalf of the petitioners were considered de-novo on merits by the
learned Additional District Judge No.2, Bikaner (for short, 'learned trial
Court'). The learned trial Court after examining the objections on merits
found that there is no substance in the objections and consequently by order
dated 14th May, 2009 dismissed the petitions of the petitioners under
Section 34 of the Act of 1996. It is apparent from the pleadings that after
rejection of the petitions submitted by the petitioners under Section 34 of
the Act of 1996, no endeavour was made at their behest to challenge the
order of the learned trial Court, and therefore, by efflux of time order
attained finality.
terms of arbitral awards. The requisite amount was paid in the month of
December, 2009.
this regard, are akin to a civil Court to grant relief to the decree-holder in
terms of the decree and not beyond the same. Elaborating his submissions,
in this behalf, learned counsel has submitted that the learned executing
Court has exceeded its jurisdiction by allowing interest @12% to the
respondent, which was beyond the scope of the award itself and as such the
award impugned merits annulment in exercise of certiorari jurisdiction of
this Court.
objections laid by the petitioners under Section 34 of the Act of 1996 were
rejected on 14th May, 2009 and thereafter within a reasonable period
cheques of the requisite amount were deposited in the Court on 25th
September, 2009, and therefore, interest claimed by the respondentcontractor was not at all admissible in terms of Section 36 of the Act of
1996, which is a very vital issue, which was not considered by the learned
Court below, while passing the impugned order. Lastly, learned counsel
has urged that in terms of Section 31(7)(a) of the Act of 1996 interest which
was disallowed on certain claims to the respondent-contractor by the
arbitral Tribunal was not at all admissible and yet the learned Court below
has allowed the same contrary to the mandate of law, which is serious
jurisdictional error warranting interference by this Court in exercise of
supervisory jurisdiction of this Court enshrined under Article 227 of the
Constitution.
Ladrecha, has submitted that even if for certain claims, the arbitral Tribunal
has not awarded interest, the respondent is entitled for interest post arbitral
award by virtue of clause (b) of Section Section 31(7) of the Act of 1996
and the learned executing Court has passed the impugned order by relying
on the said clause, which is a just decision warranting no interference in
exercise of supervisory jurisdiction of this Court.
Elaborating his
on paras 16, 17 as well as 18.4 and 18.6 of the verdict of Hon'ble Supreme
Court in State of Haryana & Ors. (supra). Paras 16 and 17 read as under:16. Some Arbitral Tribunals have misconstrued clause
(b) of section 31(7) of the Act and assumed that the
said provision requires the rate of post-award interest
in all arbitral awards should be 18% per annum, and
that they do not have any discretion in regard to postaward interest. Some have misconstrued it further to
infer the rate of interest mentioned therein is an
indication that invariably the rate of interest in
arbitrations, either pre-award or post-award, should be
18% per annum. Both these assumptions are baseless
and erroneous. If that was the legislative intention,
there would have been no need for vesting discretion in
Arbitral Tribunals, in the matter of interest, under
section 31(7)(a). The principles relating to award of
interest, in general, are not different for courts and
arbitral tribunals, except to the extent indicated in
section 31(7) of the Act and CPC. A comparatively
high rate of post-award interest is provided in section
31(7)(b) of the Act, not because 18% is the normal rate
of interest to be awarded in arbitrations, but purely as a
deterrent to award-debtors from avoiding payment or
using delaying tactics. In fact a provision similar to
section 31(7)(b) of the Act, if provided in section 34 of
Code of Civil Procedure, will considerably reduce the
travails of plaintiffs in executing their decrees in civil
cases. Be that as it may.
17. The difference between clauses (a) and (b) of
section 31(7) of the Act may conveniently be noted at
this stage. They are:
(i) Clause (a) relates to pre-award period and clause (b)
relates to post- award period. The contract binds and
prevails in regard to interest during the pre-award
period. The contract has no application in regard to
interest during the post-award period.
(ii) Clause (a) gives discretion to the Arbitral Tribunal
in regard to the rate, the period, the quantum (principal
which is to be subjected to interest) when awarding
interest. But such discretion is always subject to the
contract between the parties. Clause (b) also gives
discretion to the Arbitral Tribunal to award interest for
the post-award period but that discretion is not subject
to any contract; and if that discretion is not exercised
by the arbitral Tribunal, then the statute steps in and
mandates payment of interest, at the specified rate of
18% per annum for the post- award period.
10
petitioners that the learned executing Court has travelled beyond the terms
of the award, Mr. Ladrecha would contend that post arbitral award interest
is a right of the respondent contractor, which emanates from the mandatory
provision of law and same cannot be construed as beyond the scope of the
arbitral award.
I have heard learned counsel for the parties and perused the
impugned orders.
11
In both these cases, the crucial question, which has cropped up for
determination, can be fragmented in two parts, namely, (i) powers of the
executing Court in determining the claim of future interest on the arbitral
award and (ii) admissibility of interest posterior to the arbitral award within
the four corners of Section 31(7) of the Act of 1996.
Hon'ble
In case of State of Punjab & Anr. V/s. Buta Singh [1995 Supp. (3)
12
SCC 684], while reiterating the same principle, the Apex Court in para 3
has held as under:3.
It is obvious that the executing court had no
jurisdiction to direct the recovery of any amount which
was not granted by the decree under execution since the
decree was for a mere declaration. The order of the
executing court being without jurisdiction, it was the
duty of the High Court to have corrected that error of
jurisdiction. However, the High Court has failed to do
so.
13
In case of J & K Bank Ltd. & Ors. V/s. Jagdish C. Gupta [(2004)
10 SCC 568], three Judges Bench of Hon'ble Supreme Court, while dilating
on the powers of the executing Court under Section 47 CPC, reiterated the
same principle that executing Court cannot go beyond the decree and held
in para 2 as under:2.
The short question involved in the case is
whether the executing court could go beyond the
decree by directing that the respondent be promoted to
the post of Chief Manager. It is no more res integra
that the executing court has no jurisdiction to go
behind the decree. It is not disputed that the decree did
not contain any direction to promote the respondent to
the post of chief Manager. Under such circumstances,
we are of the view that the executing court as well as
the High Court fell in error in issuing directions in
execution case that the respondent be promoted to the
post of Chief Manager. The order under challenge,
therefore, deserves to be set aside.
We order
accordingly. The appeal is allowed. There shall be no
order as to costs.
14
presume that the arbitrator has disallowed future interest. The recitals
contained in the arbitral awards, nowhere indicate that arbitrator has
declined future interest on the claim allowed to the respondent-contractor.
It is only interest pendente lite which is disallowed to the respondentcontractor in respect of some of the claims. Therefore, the intention of the
arbitrator was to disallow interest on the claim amount from the date of
accrual of cause of action up-till passing of the award and not for the future
interest. In such a situation the irresistible conclusion of this Court is that
plea canvassed by the learned counsel for the petitioners rhetorically that
executing Court has awarded future interest to the respondent-contractor
beyond the terms of the decree by transgressing its jurisdiction cannot be
sustained.
15
Item
No.
Item-wise award
2,00,000.00
No
interest
allowed.
3,85,000.00
8%
interest
allowed.
3.
Claim on account of
wrong
interpretation
and wrong application
on B.G., BOX 8
wheeler open coal
wagons.
1,42,309.00
NIL
No
interest
allowed.
4.
Claim on account of
services done about
clearance of yard and
goodshed at DEE (TY)
and DLT
5,00,000.00
NIL
No
interest
allowed.
5.
46,406.00
31500.00
8%
interest
allowed.
6.
Claim
for
regular Bills.
unpaid
1,92,415.00
1,13,000.00
8%
interest
allowed.
7.
3,50,956.00
2,20,000.00
No
interest
allowed.
8.
96,000.00
26000.00
8%
interest
allowed.
16
Item
No.
Item-wise award
9.
Claim
for
wrong
forfeiture of security
deposit amount.
25,000.00
NIL
No
interest
allowed.
10.
Claim
for
compensatory damages
for breach of contract
under different head.
26,25,000.00
55,000.00
No
interest
allowed.
TOTAL
50,53,582.00
10,20,500.00
Claim
No.
Particulars
Amount
Claimed
Amount
Awarded
Interest
The
Claim
on
account of wrongful
recovery
&
unjustified
withholding of dues.
1,53,534/-
1,21,000/-
8% interest
allowed.
2.
3,60,000/-
58,400/-
8% interest
allowed.
3.
3,52,500/-
1,92,000/-
8% interest
allowed.
4.
1,56,000/-
60,000/-
No interest
allowed.
17
Claim
No.
Particulars
Amount
Claimed
Amount
Awarded
Interest
5.
15,00,000/-
1,00,000/-
No interest
allowed.
6.
25,000/-
10,000/-
No interest
allowed.
Total
8% interest on
Rs.3,71,400/(Three Lakhs,
seventyone
thousand, four
hundred only)
Rs.1,70,000/(One lakh
seventy
thousand only)
to be paid
without
interest.
18
The dispute now remains only with respect to the future interest or
interest post arbitral award, which is precisely allowed to the respondentcontractor by the executing Court in the impugned order to examine the
same within the four corners of the Act of 1996.
19
Well it is true that arbitral Tribunal is not a Court within the meaning
of Section 34 CPC, but the decision in
20
silent for post award interest, the provisions contained under Section 31(7)
(b)can be invoked to award future interest by applying analogy under
Section 34 CPC. As a matter of fact, Section 31(7)(b) of the Act of 1996
mandates grant of future interest @18% per annum unless the award
otherwise directs. This view finds support from the decisions of Honble
Apex Court in State of Haryana & Ors. as well as Indian Hume Pipe Co.
Ltd. (supra). Section 31(7) of the Act of 1996 with emphasis on clause (b)
reads as under:31(7)(a).
Unless otherwise agreed by the parties,
where and in so far as an arbitral award is for the
payment of money, the arbitral Tribunal may include in
the sum for which the award is made interest, as such
rate it deems reasonable, on the whole or any part of
the money, for the whole or any part of the period
between the date on which the cause of action arose
and the date on which the award is made.
21
31(7)(b).
A sum directed to be paid by an
arbitral award shall, unless the award otherwise
directs, carry interest at the rate of eighteen per
centum per annum from the date of the award to
the date of payment.
Therefore, by allowing post award interest to the respondentcontractor for entire determined claim in both the awards, the learned
executing Court has not committed any manifest error of law warranting
interference in exercise of supervisory jurisdiction of this Court under
Article 227 of the Constitution.
Thus, viewed from any angle, I have not been able to find any error
much less an error apparent on the face of record in impugned orders, nor it
is a case whereby learned executing Court has transgressed its jurisdiction
while passing the impugned orders.
22
Resultantly, both the writ petitions are bereft of any merit and
accordingly same are dismissed.